Desert Hot Springs Declares Fiscal Emergency To Avoid 2nd Bankruptcy

DESERT HOT SPRINGS (AP) — This financially troubled city declared a fiscal emergency Tuesday in an effort to avert a second federal bankruptcy filing.

The City Council voted unanimously to declare the emergency as the city grapples with a $6 million gap between revenues and spending.

Interim City Manager Bob Adams has said declaring a fiscal emergency would enable the city to negotiate with contractors and labor groups to cut expenses.

If no action is taken, the city of 27,000 people near Palm Springs will run out of money by March, officials said.

The city previously filed for bankruptcy in 2001 after a legal judgment.

Three other California cities sought Chapter 9 bankruptcy protection last year in the aftermath of the economic downturn, pension costs and the loss of state redevelopment funds.

Desert Hot Springs, a modest bedroom community known for its boutique spas and hotels, expects to take in nearly $14 million in revenue during this fiscal year while spending $20 million. The city has already slashed its non-sworn workforce by 66 percent in the past eight years but has been overspending for several years.

“If significant action is not taken, the projected depletion of the city’s reserves to meet the city’s financial obligations would cause the city to file bankruptcy,” Adams said in a staff report.

If the deficit lingers, it’s unclear how Desert Hot Springs could remain a viable city, the report said.